On April 10, Goldman Sachs came out with a recommendation to short gold. On April 23, Goldman closed the recommendation. What kind of financial advice is good for just 9 business days? Truth be told, the recommendation contributed to a rapid decline in the gold price. A decline promptly met by record demand for physical gold. OOOPS!
Some speculate the recommendation was an attempt to manipulate prices lower in order to create a buying opportunity. That’s why I think manipulation is overrated. Eventually, the truth prevails. In this case that truth is, the trades Goldman encouraged were trades for paper gold not physical gold. Short-selling in the futures market is what helped to plunge the spot price of gold. Real gold investors, however, did not go for the head-fake. Demand for physical gold skyrocketed so fast that Goldman had to close its recommendation in 6 days.
Now let’s do a little speculating of our own. If the intent of the recommendation was to create a physical gold buying opportunity at lower prices, that attempt seems to have failed. In this case, the consequence of failure could be devastating. Regardless of whether those who sold short made or did not make a profit on their paper trade, if the intent was really to create an opportunity to accumulate physical gold, that plan seems to have gone awry. I mean, who plans to make a recommendation that expires in 9 days? If the plan back-fired, the need for physical gold is still there.
The irony is beautiful. The “Manipulators” who tried to create their own buying opportunity got caught with their shorts down as the very people they wanted to sell their gold took advantage of a great buying opportunity for physical gold, buying in record amounts.
Now stories of gold shortages are coming to the fore. Even the U.S. Mint has announced a shortage of certain gold coins. Silver also finds itself in a similar situation. Demand is skyrocketing, shortages are growing and the future for gold and silver has never looked better.
But that’s just my opinion. You are entitled to your own but if would to keep tabs on what I think follow me @DaveTheGoldDr